Tata Technologies stock valuation cheaper than KPIT Tech, Tata Elxsi; buy, says JM Financial
Tata Technologies stock valuation cheaper than KPIT Tech, Tata Elxsi; buy, says JM Financial
Tata Tech's FY24 services growth, excluding its top-3 clients, stood at 37 per cent, which JM Financial said reflected revenue diversification. It suggested a 'Buy' on Tata Tech with a target price of Rs 1,250.
Amit Mudgill
- Sep 2, 2024,
- Updated Sep 2, 2024 12:32 PM IST
After the recent stock correction, Tata Technologies Ltd is now the cheapest stock among the three auto-focused ER&D players in terms of valuations -- the other two being KPIT Technologies Ltd Tata Elxsi Ltd. With Vinfast (customer) decline behind and new deal ramps in BMW-JV and Agratas ahead, JM Financial believes the current Tata Technologies levels offer a good entry point to play the broadening total addressable market (TAM) led growth narrative.
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It suggested a 'Buy' on Tata Tech with a target price of Rs 1,250. Tata Tech's FY24 services growth, excluding its top-3 clients, stood at 37 per cent, which JM Financial said reflected revenue diversification.
"Its recent partnerships – Agratas (battery), Intel, Arm, BMW – promise to expand addressable market further. Vinfast’s 42 per cent YoY decline in FY24 masked the headline growth. With Vinfast decline largely behind and growth triggers ahead – BMW-JV, Agratas ramp, recoup of revenues from project which slipped in Q1 – we see sequential growth to accelerate. The 10 per cent correction year-to-date has wiped-off any premium over peers. That’s a good opportunity to BUY," JM Financial said.
The stock is off 24 per cent from its October 2023 high of Rs 1,400. JM Financial, which visited Tata Tech's Pune campus, said the Tata group firm has full vehicle capabilities. This includes product benchmarking, battery design, digital engineering and Software Defined Vehicle (SDV). Apart from its engineering capabilities, Tata Tech is deeply entrenched in automotive value chain across sourcing, costing, testing to name a few, the brokerage said.
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"We believe such holistic proposition will resonate even more with global OEMs in today’s budget/cost constrained environment. Recent deal wins are cases in point. Besides, the company has progressed well on key strategic priorities. BMW JV is on track for 2HFY25 kick-off," it said.
With the partnership with Agratas, Tata Group’s global battery business has already yielded joint deals from two global OEMs.
"Its work with Airbus on digital manufacturing has won appreciation from the client, paving the way for incremental opportunities in the product engineering space. Its marketing outreach – presence in Germany’s ELIV, LA’s CES and Barcelona’s MWC – should help amplify its competencies," JM Financial said.
Disclaimer: Business Today provides stock market news for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.
After the recent stock correction, Tata Technologies Ltd is now the cheapest stock among the three auto-focused ER&D players in terms of valuations -- the other two being KPIT Technologies Ltd Tata Elxsi Ltd. With Vinfast (customer) decline behind and new deal ramps in BMW-JV and Agratas ahead, JM Financial believes the current Tata Technologies levels offer a good entry point to play the broadening total addressable market (TAM) led growth narrative.
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It suggested a 'Buy' on Tata Tech with a target price of Rs 1,250. Tata Tech's FY24 services growth, excluding its top-3 clients, stood at 37 per cent, which JM Financial said reflected revenue diversification.
"Its recent partnerships – Agratas (battery), Intel, Arm, BMW – promise to expand addressable market further. Vinfast’s 42 per cent YoY decline in FY24 masked the headline growth. With Vinfast decline largely behind and growth triggers ahead – BMW-JV, Agratas ramp, recoup of revenues from project which slipped in Q1 – we see sequential growth to accelerate. The 10 per cent correction year-to-date has wiped-off any premium over peers. That’s a good opportunity to BUY," JM Financial said.
The stock is off 24 per cent from its October 2023 high of Rs 1,400. JM Financial, which visited Tata Tech's Pune campus, said the Tata group firm has full vehicle capabilities. This includes product benchmarking, battery design, digital engineering and Software Defined Vehicle (SDV). Apart from its engineering capabilities, Tata Tech is deeply entrenched in automotive value chain across sourcing, costing, testing to name a few, the brokerage said.
Advertisement
"We believe such holistic proposition will resonate even more with global OEMs in today’s budget/cost constrained environment. Recent deal wins are cases in point. Besides, the company has progressed well on key strategic priorities. BMW JV is on track for 2HFY25 kick-off," it said.
With the partnership with Agratas, Tata Group’s global battery business has already yielded joint deals from two global OEMs.
"Its work with Airbus on digital manufacturing has won appreciation from the client, paving the way for incremental opportunities in the product engineering space. Its marketing outreach – presence in Germany’s ELIV, LA’s CES and Barcelona’s MWC – should help amplify its competencies," JM Financial said.
Disclaimer: Business Today provides stock market news for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.
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